Why freemium & free trials are a terrible growth strategy for startups
Summary: original article linked at bottom
For startups to succeed, they need to find breakthrough growth. That moment where growth becomes easy and paying customers and revenue flood into the business.
Not finding breakthrough growth is the reason why 90% of startups fail.
But why do 90% of startups fail to find breakthrough growth?
Because they've been told a lie - that the key to finding it is a great product.
And so they make either one (or both) of these mistakes:
- They spend too much time perfecting their product & not enough marketing (never giving themselves the chance to find breakthrough growth).
- They market only their product to potential customers (an ineffective growth strategy because it creates sales resistance).
Neither the freemium nor free trial business model stops startups from making these mistakes.
Why?
Because for the freemium & free trial business model to work the product needs to be perfect. And so the founders are very likely to make mistake no.1.
And, when it comes to mistake no.2, well both the freemium business model and the free trial model trigger sales resistance.
Why?
This is because, in order to fully benefit from what the company has given them (their product), customers know that they need to pay money.
As such, their sales resistance is triggered. This is why conversion rates from freemium or free trials are so bad.
An Alternative Solution
What you need is a solution that:
a) Doesn't cause you to spend too much time working on your product & not marketing
b) Doesn't trigger sales resistance at any point
That solution is selling a BLUNT belief - which (for the sake of brevity here) the details of which you can find in the full article right here - https://www.linkedin.com/pulse/why-free-trials-freemium-terrible-growth-strategies-startups-monk
"And, when it comes to mistake no.2, well both the freemium business model and the free trial model trigger sales resistance."
It's the opposite of that. People are skeptical of paying for a product from a company they don't know. Free trials reduce resistance by letting them try it before they buy it. How could a free trial create more resistance than buying?
Hey Ben,
Thanks for the comment.
You're absolutely right, free trials do reduce resistance.
However, as I explain in the full article, they still do trigger sales resistance eventually because free trial users still need to buy the product at some point to continue to benefit from it.
It's why free trial conversion rates are often (but not always) pretty bad.
That's not to say that free trials never work (they do). But they are an ineffective strategy that is best avoided for the reasons I evoke in the post and article.
A much better solution is to avoid triggering sales resistance at all. It's what selling a BLUNT belief does (why is detailed in the article).
Best
Chris
We've been running a freemium model since launch and I do agree it's not right long term, though to begin with it's helped us get enough eyeballs on the product to get the feedback we needed to improve the product.
We were thinking of switching to a free-trial instead, but now I'm wondering about that 🤔 The thing is, we're in a very established market, and literally all (except one) of our competitors offer a free trial or freemium model.
Hey Chris - great name btw ;-)
Of course, it helps to get eyeballs on the product as you mentioned but I'd say that product really isn't as important as we've all been led to believe.
Thanks to selling a BLUNT belief, HubSpot was able to create breakthrough growth (& build a happy & passionate customer base) with a product that the founder himself admitted sucked.
Of course, to maintain breakthrough growth it needed to fix the product but it only did that after 4 years and $29 million in ARR.
That being said, coming to your point about your competitors - first, that's awesome that you are in an established market. With the right marketing, there is no reason why your business shouldn't succeed.
Secondly, what your competitors offer is not too important. As long as you have a unique offering in your market or can create the perception of having a unique offering (selling a BLUNT belief is a great way to do both) then despite having competitors you'll be the only one that can give them what they need.
For example - someone who adopts the CrossFit belief is not going to get a subscription at a non-CrossFit gym even if it is cheaper. They'll fork out the extra money for a CrossFit gym subscription because they want to use a product that will help them implement that belief.
Thirdly, I'd like to point out that I'm talking about not using free trials in the context of startups. You'll notice that in the companies I talk about here and on my website, a lot of them offer free trials. But they are no longer startups - they already have the growth that you are looking for.
Hope that helps
Best
Chris
Thanks for the detailed response Chris :)
I agree that paywalling your product is undoubtedly the best option for an established org that's find PMF, and I liked the post, thanks for sharing!
Thanks Chris :-)
Exactly this. It's probably not the best strategy for long-term growth but the first 100-1000 sales is going to be the hardest and the easier you can make that process the better chance you have.
When I offered free trials for Founders Cafe, I got a lot of no shows / lack of engagement. When I started charged upfront (even minimally), the engagement sky rocketed.
I also started a Gay Sorority at Stanford, and had similar findings. I asked people to pay $20 upfront, but if they couldn't due to financial pressures, they could email me and I waived it.
The people who paid upfront were HELLA COMMITTED (barely any no shows). Everyone else who waived the fee barely showed.
Hey Maddie,
Thanks for your comment.
Yes absolutely.
Can't find the reference anymore but I remember reading a study a while back where it showed that free trial users had something like a 50% lower LTV than those who paid upfront.
Obviously, it's just one study but it confirms what a lot of people (including yourself) have seen - commitment isn't as high from non-payers (even if they do eventually end up becoming paying customers after the trial).
Best
Chris
I love that you focus on sharing IDEAS rather than selling a product. Thats why people start their business—to share a big idea. If you’re really about it, why not share freely? 👏🏼
Thanks for your comment & kind words Ami :-)
Very insightful and I couldn't agree more about freemium having tried that in the past. The one piece I would offer a counter on is the free trial, especially without the need for credit card, as I've found it to be highly effective in specific situations.
For context, I have a Slack app product that helps teams increase efficiency and have found a fair bit of success not only offering a free trial, but also extending the trial period from 7 days originally to 30 days now. With the month long trial I have seen a lot more conversion into paid customers and I think that can be attributed to allowing teams to fully try out the product and give it a chance to become part of their daily ritual. By the time the month is up, more times than not they will see the value it's provided and it will have become a consistent piece of the team's day-to-day so there is almost no sales friction at that point.
Another side benefit is I've also received a lot of great feedback throughout the trial period from potential customers.
Hey Ryan,
Thanks for your comment.
That's great. I'm glad to hear that you're getting success :-)
Of course, as I've just replied to someone here - free trials and freemium CAN work.
We can see that they do.
BUT, this doesn't mean that it's a great growth strategy for the majority of startups.
It leads them into the danger zones of working too much on their product and not enough marketing (because to make free trials/freemium work, the product needs to be perfect).
Given that this is the reason that most solo startups fail, it's best to avoid a strategy that causes you to risk it - rather avoid the fire in the first place rather than have to put on a fireproof suit and try and walk through it!
Best
Chris
Hey Chris, this is deep and very insightful.
My only comment is similar to others here - freemium works well to create initial product awareness for simple and easy-to-understand products. All others need to be forced down the paid path.
Anyway, great insight. More of these please!
Hey Alex,
Thanks for your comment :-)
You're right of course it does work to create initial product awareness.
Unfortunately, that rarely converts into paying customers.
Better way (as evidenced by the companies I case study on my website, here, LinkedIn etc) is to use a BLUNT belief to capture that attention & build awareness.
It's easier to create, more effective at creating paying customers & means the founder doesn't risk making the mistake of spending too much time on their product & not enough time marketing.
More is coming :-)
Best
Chris
Great post with great insight
Thank you :-) glad you enjoyed it
I'm going to sidestep the entire BLUNT thing (either you post it here, or the bulk of us aren't going to click your link) and say this:
Freemium, generally a bad idea, unless there are very strong virality effects.
Otherwise you're just giving away your product for free.
Free trial, no credit card, okay idea, but they're default churn.
Free trial with credit card, best idea. They're default upgrade.
It's founders without a strong enough product/word-of-mouth marketing who don't have the confidence to just ask for credit cards upfront.
It's a symptom of a weak product honestly.
Unless you have concrete data that free trials without credit cards leads to more sales, I'd ask for the credit card upfront.
I've written about it here and why I decided to focus on credit card upfront trials:
https://www.indiehackers.com/post/to-ask-for-credit-card-upfront-or-not-why-not-both-4d49353477
Hey Jay,
Thanks for your post (one that I can actually engage with & chat with you on).
Agree 100% on both points.
Freemium = waste of time.
And, if a company is going to use free trials then they should be asking for a credit card upfront.
I've said it before in replies here but I'll say it again:
Free trials can obviously work. Just as freemium can.
But that doesn't mean it's the most effective strategy for most startups.
Similarly, raising a ton of VC money, hiring a team and going balls to the wall to become a public company works for a lot of startups too. But I don't think you'll see many people on here advocate that strategy because the chances of success are much smaller than building a bootstrapped company.
To come back to why free trials aren't a very effective approach for startups - as I say in the post and in these comments, the biggest reason why solo founder companies fail is because they spend too much time perfecting their product & not enough time marketing.
And, as I'm sure you're aware, for free trials to really work the product needs to be really good. The onboarding, user experience etc. etc. needs to be amazing.
It's hard and the likelihood is that the founder will fall even further into the trap of perfecting their product to increase conversion rates rather than proactively marketing.
Best
Chris
I don't think it's necessarily one or the other for all time. You could do free trial no credit card initially, then test free trial with credit card for a while, then move back if it doesn't work well. Keep testing at various stages of your business as it matures.
Freemium I agree is probably out of reach for most of us since it involves too much money to support the huge percentage of users in the 'funnel' costing money and time.
This comment was deleted 8 months ago.
The article was written and posted by "Chris Monk", who then goes on to talk about himself in the third person. You don't get more greasy than that.
Our founder started a completely free SaaS company five years ago and only started charging two years ago. Last year we made $82M with 140 employees with a near 75% margin. Freemium is the way.
Today's companies are most successful with a COMBINED strategy of PLG and direct sales.
I want to suggest the opposite.
Having a free trial or freemium model gives the business valuable customer data on how they can improve the product to make it worth the price.
For example, usage data can be analyzed to see what kind of customers interact with the product the most and how they interact with it.
If they do not move on to a paid user, you can ask them what they are missing. This is extremely valuable information that you can use to improve your product.
Freemium models are a great way to get users engaged with your product and start using it right away. However, they often don't work out well for businesses. Why? Because you're giving away something valuable (your time) for free, and if you don't have a good enough value proposition, people won't stick around long enough to convert them into paying customers.
Freemium models aren't just bad for startups; they're also bad for established companies. When you give away something valuable for free, you're essentially asking someone to pay for it later. That's not how business works. You need to make sure that what you're offering is worth the cost before you ask anyone to pay for it.
The biggest mistake I see entrepreneurs making is assuming that their product is worth the price tag. If you're charging $10/month for a service, then you need to make sure that the service you provide is actually worth at least 10 times that amount. Otherwise, you'll end up losing money instead of making it.
If you want to build a successful startup, you need to know exactly who your target audience is. You need to figure out where they hang out online, what kind of content they consume, and what makes them tick. Once you do that, you can craft a customer acquisition strategy that gets you in front of those people.
When you launch a product, you should focus on building only one thing. If you try to add too many features, you'll confuse your users and lose them. You'll also end up spending a lot of time developing things that no one wants.
Your product design doesn't matter much if you're launching a freemium model. People will use whatever tool is easiest to use. So, if you're going to offer a free trial, make sure that it looks nice and feels intuitive.
Pricing isn't about getting rich quick. It's about figuring out what your product costs, and then setting a fair price based on that. If you set your pricing too low, you'll never make any money. But if you charge too high, you'll alienate potential customers.
Many companies offering developer services seem to always have a free tier, either resource limited or commercial vs non-commercial. It is properly valuable to allow developers to use and get familiar with your service and then look to charge companies.
I am looking to do that with my own product as well. Free for public repositories and private has to pay.
Hey Lasse,
Thanks for your comment.
The danger you could run into is spending too much time working on the free tier (product & customers) and not enough getting paying customers.
Get the money in the door first. It should be your number one priority.
I think you bring a point that should definitely be considered. I think early startup have the ability and privilege to try both . Try getting Getting paid upfront maybe that works , if not go for freemium or trial. Play around until you find what works.
Hey Dario,
Thanks for the comment.
Fraid I disagree. If you try getting paid up front and it doesn't work, the solution is absolutely not to go back to freemium or trial. You'll just be delaying the potential customer refusing to buy by a few days or months.
If they don't buy there's a problem with your marketing.
I 100% disagree.
If the solution you're offering is a pain killer, not a vitamin, then giving a free trial is the way to go.
I am giving 7 days of free trial with no card needed on emailgurus.xyz because I know once you get your unknown senders caught and classified, you can't live without it.
You have a great point, but there's also merit in free trials. It allows customers try products, see the merits in them, and convinced about the merits through seeing day-to-day gains, completely reduces their resistance.
Hey,
Thanks for the comment.
You're right of course there is merit in free trials.
But they are not a great growth strategy for startups for the reasons I go into.
Best
Chris
When initially testing a product for the market, providing a free trial or free version of the product will reduce resistance to sign up. Once value is seen, users may decide to buy the product. This atleast is my thought process, and I have used many products like Canva, Figma and Wix for their free offering and upgraded after I saw value. I am not sure if it is always true that freemium offerings are terrible for startup growth.
Hey Vishnu,
Thanks for your comment.
Of course it can work. But as the article states - in order to make freemium & free trials work, the product needs to be perfect.
The biggest reason that solo founded startups fail is because they spend too much time working on their product & not enough time marketing.
Free trials & freemiums only encourage founders to work EVEN MORE on their product in order to convert free users to paying ones.
So, they end up doing even less marketing & end up either running out of money or giving up because they couldn't get many paying customers.
By selling a BLUNT belief your product doesn't really matter too much. You can find breakthrough growth & create a very happy & passionate customer base with a basic product (HubSpot had a "bad" one and indiehacker YNAB had a basic spreadsheet).
Best
Chris
Thank you, Chris. You have laid it out perfectly. I will try to follow the BLUNT method for a product I am building. Will keep you posted on how it goes!
Cool glad I could help!
If you need help you know where I am :-)
The homey atmosphere is what makes a place feel more hospitable and comfortable, regardless of whether it is about entertaining visitors or finding the ideal relaxing space in your home. You will discover that many people are now either relocating to get a couch cum bed or even acquiring a sofa cum bed for their houses if you visit a lot of places like friends or relatives.
Visit to know more- https://springtek.in/
This comment was deleted a year ago.
Agreed...
I felt so greasy after reading this post.
Snake oil salesmanship in action.
This comment has been voted down. Click to show.
I'm not the person who wrote the comment above, but I think I know where it was coming from.
The words assembled to make sentences, but at first I couldn't understand what they really meant. It felt more like a confusing sales pitch than an actual description of a process.
"No product required" with an example of HubSpot...which had a product?
That...sounds a lot like inbound marketing. So HubSpot was eating their own dogfood and promoting their product by the very method their product enhanced? That's cool...but it's inbound marketing, yet? Publishing content that your users will find compelling, building your audience, and then leveraging that audience to sell a product that was tuned to the method they were promoting.
So far I'm not seeing anything unique about BLUNT that isn't just a description of inbound marketing, in fact. And in your linked sales site you mention six more companies, only three of which, in my opinion, actually followed that approach.
CrossFit promoted a branded fitness routine that was licensed everywhere; if you wanted to call your program "CrossFit" you needed to buy it from them. Maybe they wrote articles on how to do CrossFit? Otherwise seems pretty traditional to me.
Salesforce offered a zero-install product that worked better than the competitors; I don't see how it's "BLUNT" at all. If they wrote a ton of articles about how to do CRM that I never saw, then I could see that being inbound marketing, but again, I never saw that. And Drift...hardly created the idea of a chatbot. I've heard of chatbots and seen dozens of services for them and I've never heard of Drift.
Even You Need A Budget (YNAB) had a product at the start; maybe it was simple, but that's not BLUNT, that's MVP. As did HubSpot, by the way.
Point is that I'm not seeing any ways in which this BLUNT concept departs from the core concept of inbound marketing as promoted by HubSpot. And I think that's what rings false. It's a lot of words that, roughly, describe inbound marketing, with a lot of filler that makes it seem more than that--and that leads to some expensive downloads that, for all we can tell, simply describe inbound marketing.
Yep exactly agree. Just feels like this post was just a way to promote a book or sell some sort of course/service for BLUNT when the author goes out their way to try and mention it in every reply.
Hey Herman,
Thanks for your comment.
I'd like to first just address one thing you said and then share a mentality that I think will help you with your plans to become a successful entrepreneur.
First, regarding why this post was written.
This post is written because I want to promote a far more effective way for startups to grow their business.
Yes, there are products & services attached to what I'm talking about. But these products are completely optional. Someone can implement what I talk about without them.
BUT, if they need help doing so and don't want to waste time barking up the wrong tree they can solicit help by buying my help (and by doing so contribute to cancer research around the world at the same time).
Yes I'm talking about it a lot in the comments because its part of the post - I'm answering questions.
Now, moving onto the mentality I talked about.
The mentality that you seem to have is one that I see a lot (not just here but in nearly 20 years of marketing & selling) - that mentality being that, because someone has something to sell then they are automatically full of sh***.
But this is not only wrong but incredibly destructive to their success in entrepreneurship.
The fact there are products & services attached to what I am saying does not mean that what I am saying is wrong.
Take LinkedIn for example. It's a great place to market one's services & products to other business professionals.
So, if I told you that, if you sell a B2B SaaS product, then you should market on LinkedIn, that would be objectively good advice.
But let's say I sell a service/product that helps you market on LinkedIn - does that change the quality of my advice?
No of course not. Yes, I would have a vested interest in your marketing on LinkedIn but that wouldn't make me wrong. Telling you to market your B2B service/product on LinkedIn would still be correct and truthful.
Lots of aspiring entrepreneurs (particularly devs) have this ingrained belief that marketing & selling something is dirty and wrong and all about lying and trickery.
This kills any chance of success for them because they become too scared of actually marketing their solution cos they feel "dirty" and "slimy".
The mentality I hope that you take away with you is that selling & marketing are acts of service - yes you "might" get paid at the end but that doesn't change the fact that you are helping people & providing value and aid to them even if they never buy what you sell.
Sorry I know this is a bit of a rant, I could go on and on but I'll stop here :-)
Hope that helps you in some way.
Best
Chris
This comment was deleted a year ago.
Hey Tim,
Thanks for your detailed reply.
Yeah you haven't understood what it is at all but that's MY fault not for not explaining it clearly enough.
You're confusing the HOW a company sells something with WHAT a company sells.
Inbound marketing is HOW every company in the world markets these days (thanks to HubSpot's efforts at promoting it).
All of the companies that I have case studied used inbound marketing to sell their BLUNT belief & products.
But WHAT they sold however was a BLUNT belief.
Salesforce sold a BLUNT belief called NO SOFTWARE. How they sold it was by using inbound marketing (and other tactics).
YNAB sold a BLUNT belief about the way to do personal budgeting (4 rules etc.). How they sold that belief was by using inbound marketing.
CrossFit sold a BLUNT belief about the best way to get fit. How they sold that belief was by using inbound marketing.
In HubSpot's case the HOW and the WHAT was the same.
As you say they ate their own dogfood. In order for a target audience to adopt a BLUNT belief, they need proof that it is better at helping them reach their goals than what they currently believe. Dogfooding the belief is one way to do this.
Does that make more sense?
Best
Chris
I think I understand the point now, but at the same time it seems completely non-actionable.
A startup does not always focus on a concept that can be distilled down into a pithy lifehack.
And I still disagree with the idea that Salesforce was selling anything but a compelling product.
"No software" (or rather, SaaS) was new back then, and maybe they got additional press as a result, but what sold their customers was that it worked well and the price was right.
Facebook didn't succeed because they were selling some new abstract concept. They were the fifth or sixth similar service on the market. Heck, their original idea was to be a "hot or not" variant, I think.
Google didn't succeed because they were selling a new idea either. They entered the already competitive internet search space and just did a better job with search than anyone else.
Selling BLUNT as if it's a panacea for all startups is disingenuous at best, and snake oil at the worst. Either a startup has such an idea, in which case of course they'll promote it using inbound marketing, or they are selling a better product with no core ideas, in which case it's an irrelevant concept.
How can your materials possibly contain thousands of dollars worth of insight and value to an indie developer? There is no possible way to teach people how to have a profound life changing insight. Which is why, I think, you're getting such negative feedback here.
Have you sold a single copy yet?
Hi Tim,
I think we're going around in circles here so I'll probably just reply to this one more time to you and then stop.
It's totally actionable. I'm sure I'll be laying out that process here at some point in the future.
You can certainly disagree but Salesforce's founder himself doesn't. As he himself says, selling the belief of NO SOFTWARE was critical to the company's success & its long-term differentiation - it branded them as something more than just a CRM company. This led to the creation of the AppExchange which created an almost insurmountable barrier to entry competitors.
Facebook, Google etc. Yes you are 100% right. That's exactly what they did. I'm NOT saying that it doesn't ever work - I'm saying it's not the most effective strategy for most startups. It has a much lower chance of success. Obviously, you disagree that this is the case (which is fine and understandable given your profession) but don't confuse what I'm saying with something I'm not.
You're right, it's not a panacea, indeed as I put on the very front page of my website this does not guarantee success, it just increases the chances compared to a product-led one.
"How can your materials possibly..." - I'm sorry but just because you don't understand how something can be doesn't make it untrue.
"There's no possible way..." - again, I'm sorry but you're arguing again from incredulity. Just because you don't understand how something is possible doesn't make it untrue.
As someone who has spent nearly 20 years marketing & selling I can tell you that negative feedback comes with the territory (and it's even a good thing).
You're right, few indiehackers are paying thousands of dollars. That level of engagement (which involves my personal time and one-on-one engagement) is usually bought by startups with more available financial resources. Bootstrapped startups tend to buy the DIY option.
Your concern for my financial situation is touching ;-) Yes, I don't do too badly for myself thank you.
Best
Chris
Hey Mick,
Thanks for your comment.
You're right. There are indeed innumerable businesses that have thrived by employing the freemium/free trial model.
But that doesn't mean that it's a great strategy for startups to use.
I think we can agree that the biggest reason that a startup fails (particularly an indie hacker solo one) is that the founder spends too little time marketing & too much time perfecting their product.
But for free trials and freemium to work everything about the product & the user experience needs to be perfect.
So, when the free trials & freemium users inevitably struggle to convert the founder is only going to have to spend more time working on their product - they get stuck in this ongoing spiral of working on their product more and more.
End result = not enough money & failure.
Now, free trials can be pretty awesome once you have an established business.
Take YNAB (You Need A Budget) for example. It's a personal budgeting application started as a sideproject by husband and wife.
They sold a basic spreadsheet for a few years without offering a free trial (and managed to triple their revenue once they started selling a BLUNT belief). Now these days, with lots of devoted customers (passionate & devoted because they are believers in the company's BLUNT belief) they offer a free trial for their solution.
In other words, they can get away with using a free trial now (but it still creates problems for them - carrying lots of users who don't end up converting).
Hope that makes more sense?
Best
Chris